Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—Should you use a performance improvement plan?, (Mar 24, 2025)

By Timothy Howlett of Dickinson Wright PLLC

A Performance Improvement Plan ("PIP") is a long-standing HR tool for managing underperforming employees. Employers often use a PIP to document deficiencies and outline specific goals the underperforming employee must reach within a specific timeframe.

While PIPs sound good in theory, they have recently come under criticism from employees, HR professionals, and even employment lawyers. A primary criticism is that PIPs are used as a check-the-box step before an employee is fired. Employees often view them as a sign their job is already lost, leading to disengagement rather than improvement. Because of this, they are often viewed as a cost-cutting measure used in an effort to get employees to resign rather than go through a PIP.

From a legal standpoint, a PIP can help defend against wrongful termination claims—but only if truly fair and well-documented. If an employee is fired for performance issues, their counsel may question why they weren't given a chance to improve and argue that a PIP should have been used first.

Practical Considerations

PIPs can serve a useful purpose but do not necessarily fit every situation. The following are points that should be considered when considering if a PIP is the right performance-management tool:

• Determine if the issue with the employee is a performance issue or a misalignment of expectations.

• Have there been discussions with the employee regarding performance issues prior to the PIP?

• Has the employee received clear and consistent feedback before the PIP?

The employer must examine each situation to determine whether to engage in a PIP. If that examination leads to a conclusion that the specific performance issues or the personality of the employee or the supervisor make it highly unlikely that the PIP will be successful, then it should not be used.

If a PIP is not appropriate, the employer should instead consider terminating the employee at the time, providing it is confident that termination is justified.

If a PIP is determined to be advantageous to the situation, the PIP should be aligned to identify specific, measurable, objective, and realistic performance goals. The PIP should also allow for a reasonable time to ensure the employee is given proper time to adjust the employee's work to meet the performance expectations. Improvement takes time. If it is not reasonable, it will be negative evidence rather than positive evidence if the employee is terminated or demoted.

HR should be involved, if not also legal, to ensure consistency and to monitor the conduct of both the supervisor and the employee during the PIP. It is also important to ensure supervisor buy-in and to determine whether the supervisor is doing their share to properly performance manage the employee.

Employers should also ensure that PIPs are fairly applied among all employees to avoid allegations of discrimination and unfair treatment.

The PIP should provide for regular meetings and feedback. The employer should be committed to those dates, and if, for some reason, a meeting has to be moved, it should be rescheduled as soon as possible.

A record should be kept providing information regarding the feedback on the PIP and the meetings that occurred during the PIP. The input should acknowledge any improvement that is made.

At the end of the PIP, the employer should evaluate the employee's performance under the PIP. The employer can remove the employee from the PIP with a communication that the improved level of employment needs to continue, choose to extend it if there has been improvement but not enough for satisfactory completion, or terminate the employee if appropriate in consultation with HR and Legal.

Consider Alternatives

Some companies have moved away from PIPs and instead use:

• Regular feedback loops and coaching sessions.

• Collaborative performance plans where the employee and supervisor create an improvement strategy together.

• Severance agreements, if both parties agree that parting ways is the best option or it is determined that the performance issues cannot be corrected.

Takeaways for Employers

A PIP can be a useful tool to address performance issues. It is not a one-size-fits-all tool. As a result, the employer should carefully evaluate the situation and seek legal counsel, as appropriate, before and at the end of the PIP. If you're an employer considering a PIP or interested in other performance-management strategies to best fit your company culture, consult with an employment lawyer to ensure that the plan is appropriately structured and does not inadvertently create more risk than it mitigates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Timothy Howlett

Dickinson Wright PLLC

500 Woodward Avenue

Suite 4000

Detroit

MI 48226-3425

United States

Tel.: +1 313 2233500

E-mail: KDurso@dickinson-wright.com

URL: www.dickinson-wright.com/

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Attorneys: (Dickinson Wright).

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